By Kaswar Klasra
Pakistan may use ‘Yuan’ in trade with China—analysts
Chinese Yuan achieved a milestone as two of the World’s well-reputed and biggest banks including the European Central Bank and the People’s Bank of China established a currency swap agreement, the latest in a string of moves to help encourage global use of the, Chinese currency.
The deal was aimed at facilitating commercial exchanges between the Euro-zone and China by giving European banks access to 350 billion yuan (42.4 billion euros) and giving Chinese banks access to 45 billion euros.
The deal worth Rmb350bn ($57bn), is China’s third largest after its facilities with Hong Kong and South Korea, and follows similar agreements with the UK, Australia and Brazil.
A press note issued from the European Central Bank confrimed the deal accordingly.
“The swap arrangement has been established in the context of rapidly growing bilateral trade and investment between the euro area and China, as well as the need to ensure the stability of financial markets”, the ECB said in a statement.
The deal has symbolic importance, and reflects the growing trade between eurozone countries – especially Germany and China.
It is worth noting that China is the EU’s second biggest trading partner, with about €1bn of trade between the two each day. The European Commission has also confirmed the figure.
The research done by ‘Pakistan Observer’ revealed that ‘ Renminbi’ is on the fast-lane to replace US dollar as International Currency.
There are no empty claims. Since ‘Renminbi’ is backed by the Gold, world’s major countries including are striking deals with China to replace ‘ Renminbi’ in with Dollar in bilateral trade. And Pakistan is no exception.
The government of Pakistan, like other major countries in the world, is also considering a proposal to start using the Chinese yuan in trade with China.
“We are examining the use of yuan instead of the US dollar for trade between the two countries,” Ahsan Iqbal, Federal Minister for Interior told the media after the official launch of the Long Term Plan (LTP) for the China-Pakistan Economic Corridor (CPEC) worth billions of US dollars.
According to sources, Pakistan was all set to replace Dollar with Yuan in trade with its all weather friend China. However, Pakistani authorities may take some time to formulate strategy. Currently, bilateral trade between Pakistan and China was worth $13.8 billion in 2015 to 201
6, a decade after the countries signed a free trade agreement.
For those opposing Pakistan’s likely decision to replace Dollar with Yuan, research done by this correspondent has revealed that the list of countries using China’s yuan currency for trade continues to grow, supporting the China’s efforts to internationalize its currency.
During the last two years, the number of countries that use the yuan for more than 10% of the value of their payments to China or Hong Kong has increased by seven. That brings the total of such countries to 57. There are currently 101 countries using the yuan as a trade currency.
According to World’s leading economist Mr.Carl Weinberg, China will “compel” Saudi Arabia to trade oil in yuan and, when this happens, the rest of the oil market will follow suit and abandon the U.S. dollar as the world’s reserve currency.
Saudi Arabia has “to pay attention to this because even as much as one or two years from now, Chinese demand will dwarf U.S. demand,” Weinberg said.
“I believe that yuan pricing of oil is coming and as soon as the Saudis move to accept it — as the Chinese will compel them to do — then the rest of the oil market will move along with them,”Carl Weinberg told CNBC in October last year.
It is worth noting that, In recent years, several nations opposed to the dollar being the world’s reserve currency have progressively sought to try and abandon it.
Russia and China have sought to operate in a non-dollar environment when trading oil. Both countries have also increased their efforts to mine and acquire physical gold if, or perhaps when, the dollar collapses.
According to an estimate, moving oil trade out of dollars into yuan will take right now between $600 billion and $800 billion worth of transactions out of the dollar.
If that happens, it will be great achievement for China which is already making huge progres in leadership of Chinese President Xi Jinping and likely to replace the USA as World’s supper power.
There is no denyying that companies around the globe have also been conducting more business in yuan. According to Swift, Yuan was used in 2.03% of global payments by value in September, up from 1.86% in August. The value of yuan global payments increased by more than 10% in September this year, much higher than than average growth of 0.93% for all currencies.
Although, ratio of Yuan adoption was less by the US and Japanese companiese, however, there was seen growth in yuan payments which came through trade with Singapore, the U.K, and South Korea.
On January 22, 2015, The central banks of China and Switzerland signed a pact to establish a yuan trading center in Zurich.
While confirming the deal, Switzerland’s central bank had announced that it had signed the agreement with the People’s Bank of China. The deal was concluded during the visit of Chinese Prime Minister Li Keqiang to the World Economic Forum in Davos two years baack in January 2015.
According to the agreement, Switzerland will receive a quota of about $8 billion (50 billion Yuan).
While government of Pakistan is taking time to decide wether to trade in ‘ Yuan’ with China or not, Islamabad based analyst Sohail Iqbal Bhatti believes that Pakistan can get huge benefits by trading in ‘ Yuan’. “ trading in Yuan is in favour of Pakistan and it should sign an agreement in this regards,” Sohail told Pakistan Observer.